E5 Economic Development

Question 1

define LIVING STANDARD

Answer 1

ppl’s social + economic wellbeing in a country

Question 2

calculate real GDP per head
what does it measure?

Answer 2

real GDP / population

it measures the average income per person in a country

Question 3

explain the components of HDI

(identify + how they are measured)

Answer 3

Income - GDP/head
Health - average life expectancy
Education - average years of schooling

Question 4

explain the LIMITATIONS of real GDP per head and HDI as indicators of LS

Answer 4

they don’t consider:
• Income distribution
• Cost of living
• Environmental issues

Question 5

explain the REASONS for DIFFERENCE in ppl’s LS

Answer 5

POPULATION → high D → inflation, congestion, pollution → cost of living, health

PRODUCTIVITY → high D low S → higher income

INFLATION → cost of living

GOVT → tax, welfare, benefits → redistribute income

Question 6

# define ABSOLUTE POVERTY
define RELATIVE POVERTY

Answer 6

A: cannot sustain the most basic needs for survival
R: cannot sustain the same LS as others in the same society

Question 7

CAUSES of poverty

Answer 7

SKILL/AGE/HEALTH → productivity, immobility → income, UE → LS

GOVT DEBT: repay is funded by increased tax + decreased G spending (education, healthcare, welfare benefits…) → productivity + income → LS

Question 8

how can govt REDUCE POVERTY?

Answer 8

EXPANSIONARY FP+MP → AD → UE + income → LS
(EG → high AD → low UE + high income → high LS!!!)

SSP → productivity, mobility → UE+income → LS

PROGRESSIVE TAX → higher incomes pay more tax → tax revenue funds G spending (healthcare, education, welfare, benefits…) → redistributes income

Question 9

factors that affect population growth

Answer 9

birth rate, death rate, net migration

Question 10

define BIRTH/DEATH RATE

Answer 10

number of birth/death per 1000 population per year

Question 11

reasons for difference in BIRTH/DEATH RATE

Answer 11

healthcare, food, pollution, natural disaster/war → LS

Question 12

difference between Immigration and Emigration

Answer 12

I: moving in
E: moving out

Question 13

define NET MIGRATION

Answer 13

difference between immigration and emigration per 1000 population per year

Question 14

analyze the points on this graph

Answer 14

under-population:
not enough labor → can’t fully exploit resources → low productivity → low LS

optimum population
maximizes resource exploitation → highest productivity → highest LS

over-population:
resource shared between too many ppl → shortage, pollution, congestion, inflation → LS decrease

Question 15

calculate DEPENDENCY RATIO

examples of dependent population?

Answer 15

Dependent Population / Working Age Population

• Students (education)
• Retired (receive pension)
• Unemployed (receive UE benefit)

Question 16

analyze the effect of AGING POPULATION

Answer 16

• *lower productivity** due to age/health
• *lower spending+investment**
• *increased pension, healthcare, welfare** → budget deficit, increased pressure on working population

Question 17

analyze the effect of a YOUNG POPULATION

Answer 17

healthcare, education → increased pressure on working population

women resign to look after babies → fall in working population → fall in productivity

*But this is not a long-term problem and could benefit the society once they grow up!

Question 18

analyze the PROS/CONS of an INCREASING POPULATION

Answer 18

• *+ AD** → EG
• shortage → IF, M
• *+ better use of existing resource** → output, EG
• over-exploitation of resource → NE (environment, pollution, congestion)
• *+ labor force** → PC → EG
• surplus of labor → UE
• *+ tax revenue**
• higher G spending (welfare, benefit, healthcare, education…)

***depends upon:
• type of population: working-age or dependent? age? skill?
• enough S/FOP to match D?
• job creation?

Question 19

factors that influence economic development

Answer 19

capital/infrastructure → output, productivity, FDI

E&T + healthcare → productivity

(over-dependence on agriculture → low income, low productivity)